John Maynard Keynes died in 1946, but this story puts another nail in his coffin.

by editor on August 25, 2011

Conventional wisdom (commonly known as “the wrong explanation”) proffers the Keynsian theory that the government deficit spending required to wage WWII stimulated the economy and eventually ended the depression of the 1930s.

John Maynard Keynes can't help but smile while thinking, "I can't believe they bought the load of crap I was selling."

Rand Simberg presents an alternative explanation:

The real reason that we recovered was that once the war was on, FDR was too distracted by it to continue to tinker with the economy, as he had during the thirties, keeping it continually sick (much like a medieval doctor continuing to bleed a patient). He had to get arms production up and could no longer afford all of his random pet nostrums.

Had Roosevelt lived, after the war, he probably would have returned to his damaging tinkering, and in fact Truman wanted to, but the new Republican Congress that came in in 1946 wouldn’t let him, and so finally, after a decade and a half of disastrous Democrat policies, the economy finally recovered, and even boomed. But it doesn’t mean that the solution is a war, or even the “moral equivalent” of one. It means that the solution is sane government.

“Sane government” is an oxymoron. Politics is the path to power and riches for otherwise talentless people. A typical politician is like a hot air balloon: a big bag of gas with a little man underneath.

The first Great Depression ended when WWII forced FDR to get out of the economy’s way. This should be food for thought for the severly malnourished Barack Obama.

The thing to remember about Keynes: His basic idea was not constant deficits, only temporary ones during business cycle lows. The politicians have taken that one basic emergency measure and turned it into a religion because its the best thing for them. If Keynes didn’t come along, they would have invented him.

FDR hated deficit spending as well. One of the reasons that the Depression lasted song was because of the high taxes and tariffs to offset stupid levels of spending. What he did was more purely Keynesian than what our idiotic rulers are doing now. Neither work as history consistently proves.

The pathologically Keynesian BBC broadcast a debate just yesterday between Keynesians and disciples of Hayek. I didn’t hear it all, but I couldn’t help noticing that the Keynesians invariably resorted to ad hominem tactics, while Hayek’s adherents were able to rely on solid facts to make their case.

If you heard this debate on the BBC Worldservice, & you live in North America, did you listen via Sirius/XM satellite radio? If so, at Noon EST, on channel 125, The Wilkow Majority w/ Andrew Wilkow comes on for 3 hours, & he is all about Hayek vs Keynes. That’s his deal, well that, guns, & punk rock. But he explains why Keynes does’nt work, & why the people who think it will are wrong. Unlike most leftists, he knows more about Keynes, Marx, Mao, & Alinsky then they do because he’s read them, & uses their books in his show. He also uses the US Constitution, & “Economics in 1 lesson” by Henry Haslet to make his points. He is the best talk show host many have never heard of yet, & that’s because he’s only on satellite radio. If you have Sirius or XM & have not tuned in, you really should. I record his show on my portable reciever & listen later at work. He’s only going to get bigger.

Could not agree more. Wilkow will become a household name in the near future. I started listening to him about three years ago and I believe he is the best informed radio host out there. He can argue both sides of the case because, like you said, he has read all of the source material. He recently interviewed David Mamet and that might have been the best 20 minutes of radio I have heard in years if not ever. Two really bright men talking about Austrian School economic theory and movies. For a guy like me it gets no better than that.

Korea didn’t help our economy, things were already booming before we went there and it is hard for gooberment policies to stop that kind of inertia. The foolishness of ‘Nam and the current stupidity going on in Iran and Afganistan has not helped our economy. Keynes was a communist fool and his economic theories prove it. The governments of Russia and China are living proof that his theories do not work, they have been doing so for hundreds of years now.

War is not the answer to anything unless it is for self protection. Sometimes protecting American interests means we have to fight on foreign soil, like WWII. Since then our government has had no business sending our young men and women to die for nothing.

Don’t take it the wrong way, as a proud veteran I support our troops. What I do not support is a bunch of elected fools who send them into harms way then will not let them do the job. We should have been done and out of Vietnam long before I was sent there. One thing President Johnson did right was the carpet bombing of Hanoi and it should have never stopped. President Bush ok’d the “Shock and Awe” attack on Iran after 9/11 and it should have never stopped until everyone in the Middle East threw down their arms and said enough! We will never mess with America again!

We have the equipment, we have the men and women, all our elected fools need to do is let them do the job. It worked pretty good in 1945, Japan and Germany surrendered, and it did not take 10 years to get the job done either.

“The Great Depression ended when WWII forced FDR to get out of the economy’s way.”

I believe that is the proper way of looking at it, however many macro types will insist that WWII is the ultimate (if only) proof of Keynes’ correctness as an economist. Without conceding that point it must be noted that if WWII is taken as proof that Keynesian manipulation works then it only works under the very specific conditions of the conscription of nearly 100 percent of available labor, the production of goods engineered for the very specific purpose of not aggregate demand but to cease existing after a short period while attempting to make other things cease to exist, nearly a decade of shortages and rationing ontop of an earlier decade of shortages and general want, the destruction of Europe and Asia, the death of 70 million people, the atomic bombing of two cities, a continued economic malaise after the end of the war and finally cutting spending by two-thirds, deregulating business, privatization of the labor force and tax cuts.

Agree, WW2 “worked” to get by the Depression, but only in the same way that a man starving can self-cannibalise his own body — it aint gonna work well for too long.

Anyway, look up the history of the Office of Price Administration (OPA) to learn how far FDR took us into totalitarianism during the War. “Price ceilings” were regular fodder for gags on the old radio shows like “Fibber McGee & Molly.”

PS- it wasn’t just the war itself either. Afterwards, millions of veterans took the GI Bill to pay their way through college, jumpstarting good careers for them as well as full employment for university eggheads, and once the economy started coming off federal control and resources started flowing back to the civilian sector, a lot more employment came through construction. You youngsters Giggle up or whatever you call it ‘WW2 housing shortage” on that one. And of course with all those prosperous young college grads buying nice new houses, they needed something to park in the driveway, something that there hadnt been new ones of since 1940.

Only a Keynsian (or Kenyan?) would look past the part of FDRs record where the economy was in the shitter all through the 30s while they both administrations were trying things.

It also really helps your economy when after the war surge the rest of the developed world is destroyed and lots of their young people are dead. The keynsian nonsense went on since and the growth in the 50s and 60s was “proof” it worked, ignoring that the US had the only non-destroyed manufacturing base AND most of its population.

Most of the fools in Congress don’t even have any education on economics yet they sit there at the podium lying through their teeth telling us they have it all under control when they don’t even know what their doing. Plus all these cretins comparing today to FDR’s time. You can’t. We have a completely different economy now. We are no longer a country that manufactures. Our biggest export is entertainment. And bad entertainment at that. We need new ideas, not twists on old ones.